Gold is heating up, silver is somehow lagging but has a tremendously bullish long term setup. Which precious metal has most upside potential in 2024? The answer is simple, and we can derive it from the leading indicator that dominates precious metals prices: COMEX futures positioning.
Note that we were convinced that gold would move higher, long before gold became bullish in recent weeks, we even said so in public writings, particularly in our very detailed public posts gold forecast and silver forecast. Although we write in the public domain about gold and silver, we offer much more detail in our premium service Momentum Investing in which we look every week at leading indicators, specific price points that matter for gold and silver, turning point analysis.
Gold bullish in 2024
Will Gold Print New All-Time Highs In 2024? The short answer: YES.
What Is Gold’s Highest Monthly Closing Price? And Why It Matters. The short answer: 1989.62 USD/oz. It matters because a monthly closing price above 1989.62 USD/oz might be the start of gold’s long overdue rally to 2250 USD/oz.
Is Gold Expected To Move Higher And Set New All-Time Highs? Obviously, YES.
That said, when gold & silver moved sharply lower, in the last week of September, we said to stay calm and focus on precious metals’ leading indicators. What we noticed was very simple: Gold’s Leading Indicator Among The Most Bullish Readings In The Last 10 Years.
The leading indicator we are talking about is CoT (source). It is a stretch indicator. In other words, its setup suggests the extent to which price can move higher or lower, depending the setup and dominant trend. Similarly, it is an indicator that suggests the likelihood of a turning point to occur. It is not a timing indicator, it will not tell exactly when a turning point might occur.
That said, we focus on the net short positions of commercial participants in the gold futures market, the blue bars in the center of the chart. When their positions get below 100k contracts (net short), it implies the price of gold is stretched to the downside, there is not a lot of downside left. This is indicative of a turning point, a rally should occur soon, that’s how to read these setups.
As seen, in the last 3 years there was only one occurrence in which net short positions of commercials fell below 100k contracts: summer of 2022. That setup, last summer, resulted in a price rally of close to 30%.
Which Precious Metal To Buy For 2024: Gold vs. Silver?
If this CoT report provides so much detail, what does it tell about the question “Which Precious Metal To Buy For 2024: Gold vs. Silver?”
Gold’s COT report suggests that it entered a neutral area. What this really means is that the outlook for price is not bearish but also not super bullish because the most important influencing factor of price (COMEX positioning) is between bullish and bearish. The data point? The net short positions of commercials, blue bars, center pane on below chart.
However, silver’s COT report clearly shows that is has very bullish readings. What this really means is that the outlook for price is bullish because the most important influencing factor of price (COMEX positioning) is bullish. The data point? The net short positions of commercials, blue bars, center pane on below chart.
So, our silver forecast of 34.7 USD/oz is still there, and if it’s not hit around year-end it should be hit in Q1/2024. We believe that silver is the precious metal to buy for 2024.
Where and how to buy gold or silver for 2024?
This question goes beyond of the scope of our work. However, we have very specific guidance on what not to do as a precious metals investor:
- What not to buy when it comes to gold and silver? Avoid at all cost derivatives, never buy gold futures (unless you have 10 years of experience with futures trading), avoid trackers, be extremely careful with options (arguably, they should be avoid unless you really know very well what you are doing).
- Where to buy gold or silver? Our preference goes to physical gold and silver in a bullion bank. This avoids the temptation of trading, we believe gold and silver is for investors (trading them is very challenging). Alternatively, it is ok to buy ETFs that track the gold or silver price, as purely and closely as possible. Those ETFs should demonstrably have enough physical gold and silver backing, they should be able to show that they don’t track anything else than the price of gold and silver.
In sum: investors might consider buying physical silver or a silver ETF (as long as it tracks the price of silver as closely as possible). Avoid trading precious metals.
Consider some precious metals miners, not all of them are worth your capital.
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